U.S. District Judge Laura Taylor Swain approved the plan in an order filed on Tuesday, bringing nearly half a decade of litigation over Puerto Rico’s financial standing to a close.
Puerto Rico filed for protection under a bankruptcy-like law, known as Title III, in May 2017. Its $ 135 billion in liabilities included more than $ 55 billion in underfunded pension obligations. The debt adjustment plan, proposed by a federally appointed financial oversight board, incorporates settlements among an array of creditors and aims to encourage new investments to aid the island’s economy.
The plan reduces $ 33 billion in bond debt to $ 7 billion and cuts overall debt by 80%, according to the board. The case has racked up approximately $ 1 billion in legal fees.
Swain noted in Tuesday’s decision that the plan has “broad but not universal support,” with many public workers and retirees, among others, taking issue with certain aspects.
The oversight board has said that under the plan, most government retirees are still in line to receive their full pensions at their current levels. However, the plan terminates defined-benefit retirement programs that cover tens of thousands of teachers and judges.
The board said in a statement on Tuesday that it welcomed Swain’s decision but that the commonwealth “needs to continue to reform itself to ensure a prosperous future.”
Puerto Rico piled up unsustainable levels of debt in the years leading up to 2017. In 2016, the federal government enacted the Puerto Rico Oversight, Management and Economic Stability Act, which created a process for the territory to restructure its debt.
The commonwealth’s troubles reached new levels just a few months after it filed for Title III protection as Hurricane Maria ravaged the island, killing about 3,000 people.